This is an archived version of a Field of Schemes article. Comments on this page are closed. To find the current version of the article with updated comments, click here.

September 04, 2009

Report: A's stadium benefit to San Jose would total only $65 million

Oy, the headline writers. The city of San Jose issued its economic impact study on a potential new stadium for the Oakland A's yesterday, and to readtheheadlines you'd think that the conclusion was that San Jose would be raking in $130 million a year in new revenue if the A's came to town.

But what the news reports call "economic benefits" is actually economic activity — in other words, the total amount of dollars spent in the city's confines. But if A's fans are buying $100 Bobby Crosby jerseys (I can't believe even Crosby's mother has one of those) in San Jose instead of Oakland, most of the money goes the same place: Into the pockets of the A's owners. The only added benefit to San Jose is whatever it skims off in sales tax, and the salary of the salesperson who actually sells the shirt.

Read the actual report, and it provides those numbers, though most of the news coverage chose not to highlight them. The key numbers are on page 25, where the report projects the arrival of the A's would bring 980 new jobs (many of which would no doubt be part-time, though it doesn't say); and on page 33, where it says that the total new tax revenue for local government would be worth about $100 million in present dollars over 30 years. And on page I-8, it also — and I give it props for doing so, since it's rare in an economic impact study — compares this to the return from doing nothing, calculating that if the land were instead allowed to have office and retail development built there local government would collect about $35 million in present value tax benefits — meaning the net value of an A's stadium would be $65 million.

So, is it worth it? We don't know, because we have no idea what the city would be spending — the general expectation is that San Jose's primary contribution would be to buy 23 acres 14 acres [UPDATE: see below] of land for the stadium and hand it over to the A's owners, but no one's saying what that would cost. (Downtown land was bringing offers of $20 million an acre four years ago, but that was in bubble money.) It's also worth noting that we haven't yet seen a proposed lease between the A's and the city, so it's conceivable there could be other hidden costs.

Let's say, though, that the city could get the land for a relative bargain price of $2 million an acre. Then San Jose would be looking at $46 million in costs, vs. $65 million in benefits (though some of the benefits, it's worth noting, would go to county agencies, not the city). And guesstimating the 980 jobs would translate into maybe 500 full-time equivalent jobs, that would be roughly $100,000 in expense per job created — pretty lousy as far as job creation goes, but in line with what most other stadium projects have generated.

Look at $2 million an acre, then, as the tipping point: If San Jose can get that price or lower, then a new A's stadium could be the next Pac Bell Park, where public costs were actually kept low enough that the modest public benefits of a stadium were worth the subsidy; more than that, and it's just throwing money down a hole. And that's assuming, of course, that A's owner Lew Wolff gets permission from MLB to move to San Jose at all — and that he can then afford the price of buying out the San Francisco Giants' territorial rights on top of building a $461 million stadium. But those are questions too complicated to get into in a headline.

[UPDATE: A reader points out that the current plan requires only 14 acres of land, not 23 acres. In that case, figure the tipping point at around $4 million an acre — above that, and even by the city's own numbers it's not worth the expense.]

Another solid point from this Economic report is that all of the figures are based on a conservative 24,000 fan a game average as well. When you look at what other teams are drawing in newer stadium, even the struggling ones 24,000 is a realistic number to be using as a baseline.

Posted by Dan on September 4, 2009 12:19 PM

Just stop Neil! This will be good for SJ through and through. One job is better than no Job! One dollar is better than no dollar! San Jose and it's downtown have benefited greatly from the Sharks and HP Pavilion. The same will happen when the A's set up shop at Cisco Field. Oh yah, repeat after me...PRIVATELY FINANCED BALLPARK, PRIVATELY FINANCED BALLPARK...

Posted by Tony D. on September 4, 2009 12:35 PM

Just stop Neil! This will be good for SJ through and through. One job is better than no Job! One dollar is better than no dollar! San Jose and it's downtown have benefited greatly from the Sharks and HP Pavilion. The same will happen when the A's set up shop at Cisco Field. Oh yah, repeat after me...PRIVATELY FINANCED BALLPARK, PRIVATELY FINANCED BALLPARK...

Posted by Tony D. on September 4, 2009 12:36 PM

Oops! Posted twice. But again, two is better than one!

Posted by Tony D. on September 4, 2009 12:38 PM

another pipe dream! most of the jobs will be low-paying, most of the money spent will be inside the stadium and the taxpayers will be fleeced again...
besides, the giants own 15% of the s.j. giants with options to increase to 51% and have the area in their territory. it'll cost the cheap a's more to buy the giants out than to build the place.

Posted by paul W. on September 4, 2009 02:12 PM

Waitaminute. I'm pretty sure that they have people selling the Bobby Crosby shirts right now; it's not $100,000 per job "created" at all, but $100,000 per job "moved south a few miles." From the point of view of the city itself, unless the people selling the shirts actually live in San Jose, there's no benefit there.

Posted by David Nieporent on September 4, 2009 02:39 PM

MLB will never overturn the Giants territorial rights to the South Bay ... the price to pay off the Giants would be astronomical.

A's belong in Sacramento.

Posted by jack m. on September 4, 2009 03:02 PM

A couple of things... The Giants don't "own" territorial rights in the sense that someone "owns" a house. The price to buy them out would be something similar to the deal struck in Baltimore which guarantees franchise value/media revenue. Not some huge one time payment. I honestly don't know why the media revenue would need to be protected as the two already compete for the same households regardless of MLB territories. But that is really up to MLB.

Note that the deal in Baltimore was not even agreed upon until after MLB had announced the Expos were moving to DC. The same thing could happen in this case... If the owners (3/4ths of them anyway) see it as a benefit to themselves to move the A's 40 miles away from the Giants and make the entire Bay Area a shared market (like LA, Chicago and NY) there is nothing the Giants can do about it.

And lastly... Where does the "23 Acres" in Downtown San Jose come from? The City's redevelopment agency has been purchasing separate plots to create a 14 acre parcel, where are the other 9 acres? I am not being facetious, just wondering if I missed something in the report when I read it?

Posted by Jeff August on September 4, 2009 03:41 PM

The Giants-A's territorial rights issue is not parallel to the Orioles-Nationals one: The Orioles did not have territorial rights to D.C., only TV rights, which are a different thing. (Every county in the U.S. is designated as some team's TV territory, but there's plenty of unclaimed territorial rights space.) I think it's pretty clear that Selig isn't going to sign off on an A's move to San Jose until the Giants are appeased, though he might well be a major factor in leaning on them to name a price.

As for the acreage, the report gave 23 acres as the 2007 proposal and didn't give a revised acreage, so I assumed that was still valid — eyeballing the map, though, it looks like it's indeed around 14 acres. My bad, then, and I'll revise the entry to make this clear.

Posted by Neil on September 4, 2009 09:02 PM

and Neil--the Gints were granted those territorial rights back in 1992 when they were intending to move to SJ---at 0 cost--yes no cost---and the fact is they chose to remain in SF---which by and large means that the territorial rights that they were granted at 0 cost to move to SJ should have been rescinded when the chose to stay in SF--at minimum a consistent model with all other 2 team territories would be appropriate--ala NY, Chicago and LA---

Also, keep in mind that the A's get about $30M a year in subsidy from the other owners for being a small market team---lots of different ways to skin a cat..but if MLB wants the A's in SJ to improve the health of the organization and the league than MLB will figure out a way to make it happen--

the absurdity of all this about "T" rights is that moving to Fremont--4 miles north of the SJ border was just fine...including changing the name to SJ--but move them into SJ proper and everything changes....can someone explain that logic??

And Neil--btw---your the king of misleading headlines to try and score a sensational punch...did you ever write for the Nat'l Inquirer?

Posted by SanJoseA's on September 5, 2009 01:06 AM

Hey Neil... I understand that the two aren't parallel. One major difference is the fact that the A's would be moving further away from the Giants in this instance, rather than into an existing teams media market. I get that the Territories are what they are, but with all facts on the table it would be pretty ridiculous to move the A's somewhere like Portland when they could be the AL rep in a market that will be the 3rd largest in the country over the next 20 years (if census projections are accurate). And, if they stay in Oakland it's fine by me.

I checked with a couple of people today, and the total acreage is 14. Most of which has already been purchased (11 Acres though the dude at the sj redev org wouldn't say how much it cost) by the SJ redevelopment org. So to me, it is a sunk cost at this point. If San Jose has a better use for the land that generates more "economic activity" that's cool. They should go for it... but the study sort of indicates the alternatives are not as attractive.

Posted by Jeff August on September 5, 2009 01:43 AM

Well, they could always sell the land, so it's not really a sunk cost. The question to use is still whether the value of the land (what would be given to the A's) is less than the net benefits to the city ($65 million according to the report, though some of that would accrue to the county).

And sure, you can argue about whether the Giants should have been given territorial rights to San Jose, but at this point they have them, and aren't going to let them go easily. (They do say that a lot of their season ticket base is from the peninsula, so San Jose is arguably more of a threat than Fremont, especially if the Daly City BART line gets extended.) I don't doubt that Selig can sit everybody down and negotiate a price — I am curious how the heck Wolff will be able to afford to pay it, on top of building a $461 million stadium. He could end up needing $50 million or more a year in new revenues, which is roughly the revenue gap between the A's and the Angels. Does anybody think the San Jose A's would be the new Los Angeles Angels?

Posted by Neil on September 5, 2009 09:33 AM

Sorry, just realized it's the Fremont line that'd be extended to San Jose, not Daly City. The Giants have somewhat less of a complaint then, though San Jose would presumably still siphon off some Peninsula fans via Caltrain (and car, of course).

Posted by Neil on September 5, 2009 11:34 AM

Neil, I appreciate that you're trying to keep up with Bay Area issues, even though you're on the other coast. The internets don't provide enough intimate local knowledge. I wouldn't pretend to have any expertise with NYC.

The 14 acres in question will be reduced to 12 as the power substation is reconfigured. That's a big difference from a few years ago, when it was assumed that the substation would be moved. It's space inefficient and could be packaged better aesthetically (as well as a substation could be).

Your estimates are not that far off the mark. The land is on the fringe of the downtown. When some of the component parcels were acquired three years ago, the going price was $7 million per acre. Half of the land has already been acquired at that price. Currently the land is worth $4-5 million per acre. While the land could be sold to developers, it's is too valuable to give just for some off-in-the-distance office space now that high speed rail is planned for the area. Chances are that if the ballpark weren't built the land would turn into redev-financed parking garages for the transit hub, a prospect which would also be somewhat controversial from a planning standpoint.

I don't think anyone's trying to match the Angels' recent aggression in LA. Arte Moreno was shrewd in realizing the potential outside of Orange County when Disney chose not to. I sense that Wolff would be satisfied with making a healthy profit while not having to be a $30 million revenue sharing recipient.

Posted by Marine Layer on September 5, 2009 06:06 PM

Right, it's that "healthy profit" that I'm wondering about. To pay back a $461 million stadium, Wolff is going to need to pay, what, $35-40 million a year, especially in this credit market? Add in $10 million a year or so to the Giants for indemnification, and the A's will need to bring in $50 million a year in new revenue just to break even.

To do that, they'd effectively have to generate the same revenue as the Angels. That seems implausible, so I'm not sure what Wolff is planning.

Posted by Neil on September 5, 2009 07:14 PM

The ballpark will be so locked into various commercialization deals that I don't expect their actual loan to be much more than half of the actual construction cost.

As for indemnification for the Giants, we can't even begin to speculate on that. MLB could go with an idea I've advocated for while: hand over $17 million from the A's annual revenue sharing check to the Giants from the date T-rights are relinquished until the park opens, and then a smaller amount of new revenue until the Giants' loan is paid off in 2017. Then again, chances are just as good that there won't be any recurring or even lump sum payment, rather it could be non-cash considerations. We don't have a good precedent (BAL/WAS doesn't count) from which to render an opinion, regardless of where anyone stands on the issue.

Posted by Marine Layer on September 5, 2009 11:31 PM

What are you thinking when you say "commercialization deals"? Naming rights could pay for a small chunk (under $10m a year), but things like PSLs or pouring rights are just ways to turn future revenue into capital — in other words, it still requires increased annual revenue to make it work. And, as you've noted, they'll need to make up the hole caused by no longer getting revenue-sharing checks as well.

I'm not saying it's impossible. Just that generating that much new revenue by moving from the East Bay to the South Bay seems like an awfully tough nut to crack.

Posted by Neil on September 6, 2009 09:35 AM

I agree that there will be a sizable revenue makeup. However, I don't think it's a choice between that and soldiering on indefinitely at the Coliseum. There may be times when a San Jose A's team gets some limited amount of revenue sharing. It's still better for MLB fiscally than what they're getting now.

Commercialization = Selling every conceivable, visible surface within the stadium. It won't be pretty.

Posted by Marine Layer on September 6, 2009 12:38 PM

Bart won't get extended. They just threatened to strike, which would have left 340,000 people scrambling to find a way to get to work, and only called off the strike at the 11th hour because of the tremendous ill will that the bart union workers generated among the public (you should see the comments section in the SF Chronicle online (sfgate.com) about the threatened strike). People on the peninsula have a pretty easy drive down 101 or 280 into San Jose, and Caltrain runs into downtown San Jose too. But I don't know how attendance will be with what's happening in the economy here (foreclosures, unemployment, layoffs, etc.), especially if a new ballpark means higher ticket prices as we've seen around the country at other new ballparks.

Posted by Chris on September 6, 2009 08:19 PM

Let's Go Oakland! is a group of A's fans, business people, labor leaders, and government officials who are committed to keeping the A's in Oakland.

But it's about much more than just building a ballpark. As part of a larger plan to build new hotels, restaurants, and cafes, a new destination stadium will attract visitors from all over the region. Like AT&T Park in Mission Bay did for San Francisco, our ballpark will be a catalyst to bring new investment and jobs to Oakland, kick-starting the next phase of our community's successful economic development.

If you support Oakland -- if you support the A's -- we hope you'll stand with us. Sign our petition, and urge Major League Baseball and team ownership to keep the A's in Oakland!

http://www.letsgooakland.com/

Posted by OAKLANDathletics on September 8, 2009 02:51 PM

The first phase of the BART extension into Silicon Valley will break ground later this month--already approved--contract was at 55% of the original estimate--saving more than $100M for BART---not sure what point Chris is trying to make equating the avoided strike to extension into the Silicon Valley--you can bet the high tech leaders will be working hard to capture stimulus dollars for not only HSR but also the BART project to bring into downtown sooner than currently forecast--

Posted by SanJoseA's on September 8, 2009 05:19 PM

If the A's belong in Sacramento, who's going to pay for it, the Governator?